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#1194129 - 06/02/09 02:26 AM Reg B, requiring signers, co-signers, joint intent
Anonymous
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In a recent loan compliance audit I have come across a lender who loves to add signers (parents for unqualified adult children or nonappicant spouses) not bother with joint intent, and also prefers to order the signing order on a loan. Obviously this is all going into an audit report. In addition to the Reg B issues and Fair Lending issues, there are other compliance issues as well. However, I think my real challenge will be to convince senior management that their new star senior lender is creating quite a compliance mess for the bank. So, I'm looking for ammunition for my arsenal. Comments please?
A very typical scenario is a young adult requesting credit, debt consolidation is typical, has a poor credit score, so the lender has a parent added as a co-borrower (not co-signer) added on the loan. I asked if he first denied the orginal request. reply- "NO". I asked if the bank counteroffered with a co-signer. reply- "NO - that is against bank policy". So, his "workaround" is to originate a joint loan, parent and adult child but requires the parent to be the primary borrower.

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#1194140 - 06/02/09 03:03 AM Re: Reg B, requiring signers, co-signers, joint intent Anonymous
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
How do you have a "primary" borrower on "joint" credit?? This "senior" lender is going to get the bank a referral to the Department of Justice unless the bank is careful. They need to follow the rules. Applicant is denied and if the bank so desires, indicates the bank would reconsider the application if the applicant brought in an acceptable co-borrower. You cannot dictate who that is, but can limit it to relatives. Oh, and just because they end up being a co-borrower on paper does not mean that they are not a co-signer under Regulation AA and trigger the co-signer notice requirement.


If you have any non-applicant spouses involved without proper documentation, you going to be in world of hurt if an examiner figures it out. Been there - done that - not a pretty process.
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#1194233 - 06/02/09 01:50 PM Re: Reg B, requiring signers, co-signers, joint intent rlcarey
Anonymous
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Several years ago when I was hired our bank too had a "star loan officer" that did not play by the rules. I continued to write the lender up and submit my reports to Sr Management with my recommendation and the possible actions that could me taken against the bank. They chose to ignore it because of the business the "star loan officer" was generating. I continue to report all violations found. That's all I could do.

When the bank was put on a MOU for compliance (ECOA) violations then Sr Management woke up and took action. Took us two exams to get the MOU lifted but it is now history.

"Star loan officers" that don't play by the rules will in the long run cost the bank more than they will earn. Believe me we now go through a very thorough fair lending review in exams both by the Fed and State examiners in each exam.

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#1194266 - 06/02/09 02:29 PM Re: Reg B, requiring signers, co-signers, joint intent Anonymous
Anonymous
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Quote: "How do you have a "primary" borrower on "joint" credit??"

I have that same question. The response is that the lender would not lend to the first applicant (son). Seems to me that is what the loan policy is stating, if the applicant doesn't qualify, don't do the loan, even with a co-signer to "shore up the credit". The lender solution is to have the mom (or strong borrwer) apply for the loan and then it doesn't matter what she does with the proceeds. The addition of the son as a co-borrower is to help improve credit score.

Quote: "If you have any non-applicant spouses involved without proper documentation, you going to be in world of hurt if an examiner figures it out."

Again, I completely agree. I don't think it is that hard to figure out, so I'm certain any examiner would easily find this. With the number of similar loans I found in a short period of time, I believe it to be a pattern and practice.

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#1194276 - 06/02/09 02:43 PM Re: Reg B, requiring signers, co-signers, joint intent Anonymous
Buccs Offline
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Joined: May 2009
Posts: 3,567
Ohio
How difficult would it be to change policy to accomodate a borrower with a thin/troubled credit file who has a responsible person willing to cosign for the loan? IMO you could get around a lot of "stuff" (to be polite) here by changing your policy to allow a denial with a counter to the borrower allowing a well-qualified cosigner. If management is in love with this lender you might be able to talk them into changing policy to accomodate a need for cosigner on a borrower who is less than well qualified. Seems like it gets to be a win-win: you ultimately "win" and are in compliance- and management gets to keep a "star" officer while saving face.

Just my $0.02 and something to consider.

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#1194657 - 06/02/09 07:16 PM Re: Reg B, requiring signers, co-signers, joint intent Buccs
KAT Offline
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Joined: Aug 2004
Posts: 986
Massachusetts
We use borrower and co-borrower. The lenders put the borrower with the best credit score first because tier pricing goes on the "primary" borrower's score. We document why the original borrower is now considered "co-borrower". It is for the benefit of the borrower for us to do this. We do have all documents that we need.

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#1194668 - 06/02/09 07:24 PM Re: Reg B, requiring signers, co-signers, joint intent KAT
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
If it's joint credit they both are severally liable for the debt whether they are a "primary" or "secondary" borrower; so why would the pricing be any different if my credit score is the best and I sign as the co-borrower on the documents? I'm just as responsible for the debt as anyone else signing the documents.


I'm a firm believer that requiring applicants to change the order of how they apply based on a policy of a lender, or the whim of a loan officer, is going to eventually get the lender a setting with the DOJ.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1194678 - 06/02/09 07:30 PM Re: Reg B, requiring signers, co-signers, joint intent Dan Persfull
KAT Offline
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Joined: Aug 2004
Posts: 986
Massachusetts
This is a credit union and even though all are liable it is put on the system differently than a bank. Banks have account numbers that drive transactions and to get all the information you go to a CIF file. Our credit union is member driven and to get information you find everything about the first signer on the account. You can have one account number but the suffix is what tells the type of account.

When I came to the cu 2 years ago this was so foreign to me but it is just how some cu's do this.

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#1194737 - 06/02/09 08:13 PM Re: Reg B, requiring signers, co-signers, joint intent KAT
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
If you are credit union then as I said in another post on this subject you probably have a legitimate reason to require the member to be the primary borrower.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1194891 - 06/03/09 02:07 AM Re: Reg B, requiring signers, co-signers, joint intent Dan Persfull
Anonymous
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Originally Posted By: Dan Persfull
If it's joint credit they both are severally liable for the debt whether they are a "primary" or "secondary" borrower; so why would the pricing be any different if my credit score is the best and I sign as the co-borrower on the documents? I'm just as responsible for the debt as anyone else signing the documents.


I'm a firm believer that requiring applicants to change the order of how they apply based on a policy of a lender, or the whim of a loan officer, is going to eventually get the lender a setting with the DOJ.


Dan, could you please explain this a little more?

In response to Buccs - yes, I thought of this too. I do think the loan policy is preventing the lender from counteroffering with a co-signer. After having a lengthy conversation with the lender (a very nice guy by the way) I see how he is arriving at his decision, and I believe he understands issues.

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#1194903 - 06/03/09 03:12 AM Re: Reg B, requiring signers, co-signers, joint intent Anonymous
Anonymous
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Oops! I only meant to quote the second paragraph. I understand the joint credit issue/severally liable. Sorry about that!

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#1194904 - 06/03/09 03:12 AM Re: Reg B, requiring signers, co-signers, joint intent Anonymous
Anonymous
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Oops! I only meant to quote the second paragraph. I understand the joint credit issue/severally liable. Sorry about that!

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#1194960 - 06/03/09 01:08 PM Re: Reg B, requiring signers, co-signers, joint intent Anonymous
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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The opinions expressed are mine and they are not to be taken as legal advice.

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